The real estate market, particularly the residential units segment, is waiting for the issuance of a mortgage law and the entry of property financiers and lenders into the market, the report said.

“The current situation makes it very difficult for developers to agree on property prices. They have to wait before putting up residential units for sale, although many companies are in a rush to sell the units they have,” Ajaj added.

The annual demand for new homes in Saudi Arabia, the largest property market in the Gulf region, is estimated at around 200,000, the report said.

According to Abdullah Al-Bluwi, a former realtor in Jeddah, it is essential to incorporate rising labor costs in the final pricing of housing units and that it is not feasible to sell at current prices.

“These property developers outsource most of the work to subcontractors, who have already raised construction prices in many projects, especially newer projects,” he was quoted as saying in the report.

“The current prices are for units that had been built much earlier and they are based on construction costs at the time, which makes sense. The move by some developers to suspend construction is prompted by concerns about increasing costs and an unresponsive market, especially since there is ample supply in the market.”

Mike Williams, chief of research at CBRE, a top real estate services firm, said: “In practice, there is no regulatory framework offered by the government for the regulation of land trading. The participants usually do not take into account the actual economic cost of land when they make their investment decisions.”

The labour shortage is the result of the recent amnesty granted by the Ministry of Labour for illegal workers to leave the country or change their job status, the Arab News report said.